Owners of BA to make competition complaint over tax deal to save Flybe

Deal to save Flybe from collapse has come under fire from rivals. Picture: PA
Deal to save Flybe from collapse has come under fire from rivals. Picture: PA
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The owners of British Airways have reported the UK government to European Union competition authorities after ministers stepped in to prevent the collapse of regional airline Flybe.

The International Airlines Group (IAG) filed a complaint with the European Commission, claiming that a promise to review air passenger duty (APD) to unlock new investment by Flybe shareholders breaches state aid rules and gives the struggling airline an unfair advantage.

Taxpayers should not be used to bail out individual companies especially when they are backed by well-funded businesses

JOHAN LUNDGREN EasyJet chief executive

IAG chief Willie Walsh described the move as a “blatant misuse of public cash”.

Downing Street insists there has been “no state aid to Flybe” and any support that is given to the firm would be on “strictly commercial terms”.

An announcement by the Treasury that it would review airport tax at the Budget secured the immediate future of the loss-making regional airline, saving 2,400 jobs.

Flybe is owned by Connect Airways, a consortium involving Virgin, Stobart Aviation and Cyrus Capitals, which purchased the airline at the start of last year. It is understood that IAG’s complaint claims the government is propping up “feeder flights” that benefit Virgin and Delta.

The Prime Minister’s official spokesman said: “The actions we have taken will support and enhance regional connectivity across the UK so local communities have the domestic transport connections they rely on.

“Any changes implemented as a result of our reviews of air passenger duty and regional connectivity will apply to all airlines in the competitive aviation market.”

In response to IAG’s complaint, the spokesman said: “The government is fully compliant with state aid rules, there has been no state aid to Flybe.”

Despite shelving is own proposed cut in APD, which has been devolved in law but remains under the control of UK ministers, the Scottish Government has not said it opposes a move to reduce the tax.

But Mr Walsh said the deal “makes a mockery” of previous promises made by Flybe about the expansion of regional flights. And other airline rivals, such as EasyJet, also criticised the state support, while also praising the decision to review APD.

Johan Lundgren, chief executive officer of EasyJet, said: “We do not support state funding of carriers, but without the detail of what is exactly proposed it is hard to comment further.

“Having said that, what is clear is that taxpayers should not be used to bail out individual companies especially when they are backed by well-funded businesses.”

A Ryanair spokeswoman said: “We have already called for more robust and frequent stress tests on financially weak airlines and tour operators so the taxpayer does not have to bail them out.”

The government has also faced criticism from industry groups over the bailout, given the perceived need for financial support and action in other sectors.

Labour’s shadow transport secretary Andy McDonald said: “This is another taxpayer bailout for Richard Branson from the Tories.

“The government needs to come clean on the restructuring plan, which must include the trade unions, agreed as part of the deal.”

Liberal Democrat transport spokeswoman Munira Wilson said: “Flybe provides a vital service in connecting many regions of the UK which are otherwise hard to travel between, not least as a result of poor rail infrastructure. Keeping these routes open has to be a top priority.

“However, Boris Johnson’s decision to bail out Flybe is a misuse of taxpayers’ money to say the least.

“If Flybe is a failing business, then it is not the right business to run these routes.”